Trade like A Stock Market Wizard: How to achieve super performance in stocks in any market by Nauvall Cassandra

Author:Nauvall, Cassandra [Nauvall, Cassandra]
Language: eng
Format: epub
Published: 2021-01-08T16:00:00+00:00

Why the stock market works

In short, stock markets provide a stable and controlled environment where market participants can rely on zero-to-low-operational risk transactions in shares and other qualifying financial instruments. The stock markets operate as primary markets and as secondary markets, operating under the specified rules as stated by the regulator.

The stock market, as the main market, enables businesses to issue and sell their shares to the general public for the 1st time through the initial public offering process (IPO). This activity allows businesses to collect requisite investor capital. This simply means that a corporation splits itself into a number of shares (say, 20 million shares) and sells a portion of those shares (say, 5 million shares) at a price (say, $10 per share) to the general public.

A firm needs a marketplace where these securities can be traded to promote this process. The stock market offers this marketplace. The company would successfully sell the five million shares at a price of $10 per share and raise $fifty million worth of funds if everything goes according to the plans. In expectation of a rise in the share price and any future revenue in the form of dividend payments, investors can receive the company stock they may expect to hold for their desired period. The stock exchange serves as a facilitator for this phase of capital raising and earns a commission from the company and its partners for its services.

Also, the stock exchange behaves as the trading platform that enables the daily purchase and sale of the listed shares, following the 1st timeshare issuance IPO activity called the listing process. The secondary market is constituted by this. For any transaction that occurs on its platform during secondary market operation, the stock exchange receives a fee.

In such trading activities, the stock exchange must be responsible for maintaining market transparency, liquidity, price discovery, and fair dealings. The exchange operates trading networks that effectively handle the purchasing and selling of orders from different market participants, as nearly all major stock exchanges across the globe now run electronically. To promote trade execution at a fair price for both buyers and sellers, they perform the price matching role.

A listed company may also sell additional, new shares at a later stage through other deals, like through the issue of rights or through follow-on offers. They can also purchase their shares back or delist them. The stock exchange facilitates transactions of this kind.

Various market-level and sector-specific indices, like the S and P 500 index or the Nasdaq 100, are also developed and retained by the stock exchange, providing a measure to chart the movement of the overall market. The Stochastic Oscillator and Stochastic momentum index offer other methods.

Both company news, updates, and financial reports, which can normally be accessed on their official websites, are also maintained by the stock exchanges. A stock exchange also funds different other transaction-related functions at the corporate level. Profitable companies, for example, can reward investors by paying dividends that typically come from a portion of the earnings of the company.

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